Banking on Africa Standard Chartered’s social and economic impact A report by Dr René Kim and Professor Ethan B Kapstein Contents 1 Introduction 4 1.1 Methodology 4 About the authors 1.2 Non-quantifiable impact 5 1.3 Scope 5 René Kim is founding Ethan B Kapstein is 2 Africa’s growth story 6 partner of Steward currently a Visiting Fellow 2.1 Reduced reliance on resources 8 Redqueen. He has worked at the Centre for Global 2.2 Economic fundamentals 8 with many multinational Development in Washington 2.3 Urbanisation, productivity and the growing middle class 9 companies and private DC. Previously he was the 2.4 The growing importance of trade 9 2.5 Remaining challenges 10 equity funds in both Chair of Political Economics 2.6 The role of the financial sector 10 developed and emerging at INSEAD and held positions markets. Previously, he at Georgetown University, 3 Standard Chartered in Africa 12 worked for the Boston Harvard University, the 3.1 Strong growth in Africa 13 3.2 Wholesale banking 13 Consulting Group in University of Minnesota, 3.3 Consumer banking 13 Amsterdam and as an and the Organisation for 3.4 Helping small businesses 13 academic at the Economic Cooperation and 3.5 Deep local knowledge 13 Massachusetts Institute Development. A former 3.6 Leveraging international knowledge and finance 14 of Technology. He holds a international banker and 3.7 Spurring innovation 15 cum laude PhD in Hydrology naval officer, Professor 3.8 Acting responsibly 15 3.9 Opportunities for the future 15 and Meteorology and is the Kapstein serves as an author of many academic economic and strategy 4 Standard Chartered’s quantitative impact 16 articles. consultant to government 4.1 Standard Chartered’s presence in Sub-Saharan Africa 17 agencies and many of the 4.2 Standard Chartered’s impact on growth and jobs in Sub-Saharan Africa 17 4.3 Contribution by economic sector 19 world’s leading multinational 4.4 Contribution by customer segment 23 corporations. His latest 4.5 Contribution to trade 24 books are Economic Justice in an Unfair World; The Fate 5 Standard Chartered’s other contributions – a qualitative assessment 26 5.1 Risk management: bank size, derivatives and hedging 27 of Young Democracies; and 5.2 Financial innovation 27 AIDS Drugs for All. 5.3 Deepening of capital markets 27 5.4 Supporting the development of Islamic banking 28 5.5 Governance and business practices 28 The authors were assisted by Hedda Eggeling, Teodora 5.6 Community investment 29 Nenova and Tias van Moorsel of Steward Redqueen, 5.7 External recognition 31 a strategy consultancy firm represented in Amsterdam, 6 Standard Chartered’s impact on Nigeria 32 Barcelona and New York. 6.1 The Nigerian economy 33 6.2 Nigeria’s financial sector 36 6.3 Standard Chartered’s activities in Nigeria 36 6.4 Impact on growth and jobs in Nigeria 37 6.5 Impact on trade 42 7 Standard Chartered’s impact on Zambia 44 7.1 The Zambian economy 45 7.2 Zambia’s financial sector 48 7.3 Standard Chartered’s activities in Zambia 48 7.4 Impact on growth and jobs in Zambia 48 7.5 Impact on trade 53 8 Standard Chartered’s impact on Kenya 54 8.1 The Kenyan economy 55 8.2 Kenya’s financial sector 58 8.3 Standard Chartered’s activities in Kenya 58 8.4 Impact on growth and jobs in Kenya 59 8.5 Impact on trade 64 9 Standard Chartered’s impact on Ghana 66 9.1 The Ghanaian economy 67 9.2 Ghana’s financial sector 70 9.3 Standard Chartered’s activities in Ghana 70 9.4 Impact on growth and jobs in Ghana 70 9.5 Impact on trade 74 10 Conclusion 76 10.1 Conclusion 77 10.2 Recommendations for Standard Chartered 78 10.3 Remarks for governments 79 Appendix 80 A.1 Model description 80 A.2 Limitations of the approach 81 Unless another currency is specified the word ‘dollar’ or A.3 Comparison with Ghana 2009 impact study 82 A.4 Overview of sectors 84 symbol ‘$’ in this document means US dollar. Foreword by Peter Sands Group Chief Executive Standard Chartered All eyes are on Africa. Over the past decade, the continent we committed to financing $2 billion in African energy has consistently grown faster than the world as a whole. projects, as part of the five-year Power Africa initiative. And unlike previous resource-driven booms, this time Yet, our role is by no means limited to provision of finance. Africa’s success is built on foundations that should be We support job creation in a myriad of other ways – by sustainable for the long term. training local talent, or by introducing innovations that make A new and confident African middle class is emerging, and it easier for people and businesses to access finance, or by trade is expanding rapidly, notably with Asia. Meanwhile, helping to develop financial markets and infrastructure that Africa is leapfrogging old technologies and embracing the underpin economic activity. In the past few years, we have digital revolution, leading the world in innovations such as advised the governments of Nigeria, Ghana and Senegal Peter Sands mobile payments. on their sovereign credit ratings, and worked with Bank of Ghana on the country’s national payments strategy. Across Africa, the opportunities are compelling. Yet, it would be wrong to deny the challenges – social, political This is our fourth and most comprehensive impact study and economic – that face the continent. to date, following country-specific reports on Ghana, Indonesia and Bangladesh. As before, we are grateful to Despite Africa’s strong performance, poverty and income Professor Kapstein and Dr René Kim for providing their inequality continue to be significant challenges. Job creation valuable insights. We will use these to guide us as we is not keeping pace with the continent’s rapidly growing continue to evolve our business in Africa. population. Lack of investment in infrastructure has left much of Sub-Saharan Africa with an insufficient and unreliable power supply, hampering long-term growth. We are banking on Africa, enthusiastic Jobs are essential to eradicating poverty and fostering real development in economies. And banking plays an important about the continent’s potential, and role in job creation. Banks fuel employment by providing credit and other financial services that help businesses set committed to being part of its future up, trade and expand – and by working with governments to remove barriers to economic activity. The study confirms, once again, that small and medium- We commissioned this independent study to measure the sized enterprises (SMEs) are powerful job creators. We will role of Standard Chartered, and of banking more broadly, in invest more time in looking at how we can work with our generating trade, growth and jobs across Africa, and to find large corporate clients to support more SMEs through the out what we can do better. supply chain. This year, we committed under the Clinton Global Initiative to expand our SME training programme In many ways, and for a long time, Africa has been home for to 5,000 SMEs, many of them in Africa. Standard Chartered. We opened our first branch on the continent more than 150 years ago. We are investing for We will also explore how we can help create greater the long term in our African franchises, using our knowledge inter-linkages between different economic sectors, from of different local economies, our deep and long-standing farming to manufacturing and distribution; it is through relationships and our global network, to support the people these crucial ‘transmission channels’ that banking translates and businesses driving trade, investment and the creation of into real development impact. wealth across the continent. We also invest heavily in the Done well, banking is the fuel on which prosperous and development and training of our people – over 98 per cent healthy economies depend. Articulating what banks do and of our employees in the region are African. why it matters, is vital in rebuilding the trust between banks By measuring ripple effects through the economy, this and society that was lost in the wake of the global financial study shows that our operations and financing support crisis and, six years on, has yet to be fully restored. some 1.9 million jobs in 13 of the 15 markets where we In all of our markets, Standard Chartered is committed to operate in Sub-Saharan Africa. The bulk of these jobs are in supporting our clients and customers, creating value for our advanced, high value-added sectors – the fast-growing shareholders and making a broader contribution to society. manufacturing and service industries that are changing the We are banking on Africa, enthusiastic about the continent’s face of Africa’s economies. potential, and committed to being part of its future. The study also highlights how we help to remove barriers to job creation, by using our relationships and capabilities in Peter Sands Asia, Africa and the Middle East to mobilise offshore capital Group Chief Executive for crucial infrastructure investment. Last year, for example, Standard Chartered The Social and Economic Impact of Standard Chartered in Africa 1 Executive summary Standard Chartered Bank has been operating in Africa The report also makes a qualitative assessment of other ways for more than 150 years and is present in 15 African in which Standard Chartered contributes to local communities countries and active in 36 countries across the continent. in Africa, including its financial innovation, risk management Currently it serves more than one million retail tools, business practices and community investments.